32
Rigid Packaging Segment
Our Rigid Packaging reporting segment manufactures rigid packaging containers and related products in the Americas.
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Net sales including intersegment sales | | $ | 698 | | | $ | 711 | |
Adjusted EBIT from continuing operations | | 72 | | | 69 | |
Adjusted EBIT from continuing operations as a percentage of net sales | | 10.3 | % | | 9.7 | % |
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| | | | | | | | |
| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Net sales including intersegment sales | | $ | 629.2 |
| | $ | 677.6 |
|
Adjusted EBIT from continuing operations | | 59.5 |
| | 80.2 |
|
Adjusted EBIT from continuing operations as a percentage of net sales | | 9.5 | % | | 11.8 | % |
Net sales including intersegment sales decreased $48.4$13 million, or 7.1%2%, to $629.2$698 million for the three months ended December 31, 2019,September 30, 2020, from 677.6$711 million for the three months ended December 31, 2018.September 30, 2019. Excluding negative currency impacts of $4.5$16 million, or (0.7%(2.3%) and pass-through of lower raw material costs of (4.1%$51 million, or (7.2%), the decreaseincrease in net sales including intersegment sales for the three months ended December 31, 2019September 30, 2020 was $15.8$55 million, or (2.3%)7.7%, driven by unfavorablefavorable volumes of 3.8%, and favorable price/mix of (1.6)% and unfavorable volumes of (0.7)%.3.9% including pricing to recover cost inflation in Latin America.
Adjusted EBIT decreased $20.7increased $3 million, or 25.8%4%, to $59.5$72 million for the three months ended December 31, 2019,September 30, 2020, from $80.2$69 million for the three months ended December 31, 2018.September 30, 2019. Excluding negative currency impacts of $0.7$2 million, or (0.9%(2.9%), the decreaseincrease in Adjusted EBIT for the three months ended December 31, 2019September 30, 2020 was $20.0$5 million, or (24.9%)7.2%, driven by unfavorablefavorable volumes of 5.6%, favorable price/mix of (18.0%)5.9%, unfavorablefavorable plant costs of (4.0%)2.6% and unfavorable volumes of (1.7%) withfavorable SG&A and other costs unfavorable at (1.2%of 0.9%, partially offset by inventory drawdown impacts of (7.8%).
Consolidated Gross Profit
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Gross profit | | $ | 654 | | | $ | 547 | |
Gross profit as a percentage of net sales | | 21 | % | | 17 | % |
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| | | | | | | | |
| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Gross profit | | $ | 617.3 |
| | $ | 453.0 |
|
Gross profit as a percentage of net sales | | 20.3 | % | | 19.8 | % |
Gross profit increased by $164.3$107 million, or 36.3%20%, to 617.3$654 million for the three months ended December 31, 2019,September 30, 2020, from $453.0$547 million for the three months ended December 31, 2018.September 30, 2019. The increase was primarily driven by growth in sales volume in the Flexibles and Rigid Packaging reporting segment driven bysegments and a non-recurrence of an inventory fair value adjustment of $58 million in the Bemis acquisition.prior period.
Consolidated Selling, General and Administrative ("SG&A") Expense
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
SG&A expenses | | $ | (329) | | | $ | (371) | |
SG&A expenses as a percentage of net sales | | (11 | %) | | (12 | %) |
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| | | | | | | | |
| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
SG&A expenses | | $ | (308.3 | ) | | $ | (205.3 | ) |
SG&A expenses as a percentage of net sales | | (10.1 | %) | | (9.0 | %) |
SG&A expenses increaseddecreased by $103.0$42 million, or 50.2%11%, to $308.3$329 million for the three months ended December 31, 2019,September 30, 2020, from $205.3$371 million for the three months ended December 31, 2018.September 30, 2019. The increasedecrease was primarily indue to the Flexibles reporting segment driven byimpact of synergy projects and reduced integration and related expenses compared with the Bemis acquisition, including related transaction and integration cost impacts.prior period.
Consolidated Research and Development ("R&D") Expense
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
R&D expenses | | $ | (26) | | | $ | (26) | |
R&D expenses as a percentage of net sales | | (1 | %) | | (1 | %) |
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| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
R&D expenses | | $ | (23.5 | ) | | $ | (17.3 | ) |
R&D expenses as a percentage of net sales | | (0.8 | %) | | (0.8 | %) |
Research and development R&D costs increased $6.2 million, or 35.8%, for the three months ended December 31, 2019, from $17.3decreased $0 million for the three months ended December 31, 2018.September 30, 2020, from $26 million for the three months ended September 30, 2019.
Consolidated Restructuring and Related Expense
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Restructuring and related expenses | | $ | (23) | | | $ | (18) | |
Restructuring and related expenses as a percentage of net sales | | (1 | %) | | (1 | %) |
Restructuring and related expense increased by $5 million to $23 million for the three months ended September 30, 2020, from $18 million for the three months ended September 30, 2019. The increase was primarily driven by a restructuring initiative relating to a plant closure in the addition of the Bemis cost base and timing of project costs.Flexibles reporting segment.
Consolidated Restructuring and Related ExpenseOther Income, Net
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Other income, net | | $ | — | | | $ | 9 | |
Other income, net, as a percentage of net sales | | — | % | | 0.3 | % |
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| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Restructuring and related expenses | | $ | (24.1 | ) | | $ | (39.9 | ) |
Restructuring and related expenses as a percentage of net sales | | (0.8 | %) | | (1.7 | %) |
Restructuring and related expense Other income, net decreased by $15.8$9 million or 39.6%, to $24.1$0 million for the three months ended December 31, 2019, from $39.9September 30, 2020, mainly driven by the loss on disposal of two non-core businesses.
Consolidated Interest Income
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Interest income | | $ | 3 | | | $ | 7 | |
Interest income as a percentage of net sales | | 0.1 | % | | 0.2 | % |
Interest income decreased by $4 million to $3 million for the three months ended December 31, 2018. The decrease was primarily driven by reduction in restructuring activities in connection with the Rigid Packaging Restructuring Program partially offset by integration activities in connection with the Bemis transaction.
Consolidated Other Income, Net
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| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Other income, net | | $ | 10.9 |
| | $ | 31.0 |
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Other income, net, as a percentage of net sales | | 0.4 | % | | 1.4 | % |
Other income, net decreased by $20.1 million, or 64.8%, to $10.9September 30, 2020, from $7 million for the three months ended December 31,September 30, 2019 from $31.0due to interest rate decreases across cash balances compared to prior period.
Consolidated Interest Expense
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Interest expense | | $ | (40) | | | $ | (60) | |
Interest expense as a percentage of net sales | | (1 | %) | | (2 | %) |
Interest expense decreased by $20 million to $40 million for the three months ended December 31, 2018 mainly driven by non repeating legal settlement gains in the three months ended December 31, 2018.
Consolidated Interest Income
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| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Interest income | | $ | 6.3 |
| | $ | 5.2 |
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Interest income as a percentage of net sales | | 0.2 | % | | 0.2 | % |
Interest income increased by $1.1 million, or 21.2%, to $6.3September 30, 2020, from $60 million for the three months ended December 31,September 30, 2019, from $5.2 million for the three months ended December 31, 2018 mainly driven by negative interest rates on a portionrepayment of Euro denominated borrowings.longer maturity syndicated and term loans with replacement by commercial paper and lower rate debt, together with decreases in rates.
Consolidated Interest Expense
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| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Interest expense | | $ | (52.3 | ) | | $ | (52.1 | ) |
Interest expense as a percentage of net sales | | (1.7 | %) | | (2.3 | %) |
Interest expense increased by $0.2 million, or 0.4%, to $52.3 million for the three months ended December 31, 2019, from $52.1 million for the three months ended December 31, 2018.
Consolidated Other Non-Operating Income (Loss), Net
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Other non-operating income (loss), net | | $ | 3 | | | $ | 8 | |
Other non-operating income (loss), net, as a percentage of net sales | | 0.1 | % | | 0.3 | % |
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| | Three Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Other non-operating income (loss), net | | $ | 4.4 |
| | $ | 5.7 |
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Other non-operating income (loss), net, as a percentage of net sales | | 0.1 | % | | 0.2 | % |
Other non-operating income (loss), net decreased by $1.3$5 million to a $4.4$3 million gain for the three months ended December 31, 2019,September 30, 2020, from a $5.7$8 million gain for the three months ended December 31, 2018.
Results of Operations - Six Months Ended December 31,September 30, 2019,
Consolidated Results of Operations
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| | | | | | | | |
| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Net sales | | $ | 6,183.8 |
| | $ | 4,545.6 |
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Operating income | | 412.9 |
| | 399.0 |
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Operating profit as a percentage of net sales | | 6.7 | % | | 8.8 | % |
| | | | |
Net income attributable to Amcor plc | | $ | 251.6 |
| | $ | 237.0 |
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Diluted EPS | | $ | 0.155 |
| | $ | 0.204 |
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Net sales increased $1,638.2 million, or 36.0%, primarily due to $6,183.8 million for the six months ended December 31, 2019, from $4,545.6 million for the six months ended December 31, 2018. On a comparative basis, including Bemis net sales and adjusting for both EC and U.S. Remedy impacts would add net sales of $1,882.9 million, leading to a combined sales for the six months ended December 31, 2018 of $6,428.5 million. Excluding negative currency impacts of $89.0 million, or (1.4%), the decrease in net sales for the six months ended December 31, 2019 was $157.3 million, or (2.4%), driven by pass-through of lower raw material costs of (1.0%), unfavorable volumes of (0.7%) and unfavorable price/mix of (0.7%).
Net income attributable to Amcor plc increased $14.6 million, or 6.2%, to $251.6 million for the six months ended December 31, 2019, from $237.0 million for the six months ended December 31, 2018 mainly as a result of the Bemis related acquisition and related transaction and integration cost impacts.
Diluted EPS decreased to $0.155 for the six months ended December 31, 2019, from $0.204 for the six months ended December 31, 2018, with the net income attributable to ordinary shareholders of Amcor plc increasing by 6.2% and the diluted weighted average number of shares outstanding increasing 39.9% for six months ended December 31, 2019defined benefit pension expense changes compared to six months ended December 31, 2018. The increase in the diluted weighted average number of shares outstanding was due to the acquisition of Bemis.
Segment Results of Operations
prior period, including lower return on asset assumptions.
Flexibles Segment
Our Flexibles reporting segment develops and supplies flexible packaging globally.
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Net sales including intersegment sales | | $ | 4,845.5 |
| | $ | 3,142.0 |
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Adjusted EBIT from continuing operations | | 619.9 |
| | 368.9 |
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Adjusted EBIT from continuing operations as a percentage of net sales | | 12.8 | % | | 11.6 | % |
Net sales including intersegment sales increased $1,703.5 million, or 54.2%, to $4,845.5 million for the six months ended December 31, 2019, from $3,142.0 million for the six months ended December 31, 2018. On a comparative basis, including Bemis net sales and adjusting for both EC and U.S. Remedy impacts would add net sales of $1,882.9 million leading to a combined sales for the six months ended December 31, 2018 of $5,024.9 million. Excluding negative currency impacts of $80.7 million, or (1.6%) and pass-through of lower raw material costs of (0.5%), the decrease in net sales for the six months ended December 31, 2019 was $71.3 million, or (1.4%), driven by unfavorable volumes of (0.8%) and unfavorable price/mix of (0.6%).
Adjusted earnings before interest and tax from continuing operations ("Adjusted EBIT") increased $251.0 million, or 68.0%, to $619.9 million for the six months ended December 31, 2019, from $368.9 million for the six months ended December 31, 2018. Including Bemis Adjusted EBIT for the same period and adjusting for both EC and U.S. Remedy impacts would add Adjusted EBIT of $212.6 million leading to a combined Adjusted EBIT for the six months ended December 31, 2018 of $581.5 million. Excluding negative currency impacts of $8.3 million, or (1.4%), the increase in Adjusted EBIT for the
six months ended December 31, 2019 was $46.7 million or 8.0%, driven by plant cost improvements of 8.6%, SG&A and other cost improvements of 3.9%, partially offset by unfavorable volumes of (2.5%) and unfavorable price/mix of (2.0%).
Rigid Packaging Segment
Our Rigid Packaging reporting segment manufactures rigid packaging containers and related products.
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Net sales including intersegment sales | | $ | 1,339.8 |
| | $ | 1,404.3 |
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Adjusted EBIT from continuing operations | | 130.0 |
| | 148.5 |
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Adjusted EBIT from continuing operations as a percentage of net sales | | 9.7 | % | | 10.6 | % |
Net sales including intersegment sales decreased 64.5 million, or 4.6%, to $1,339.8 million for the six months ended December 31, 2019, from $1,404.3 million for the six months ended December 31, 2018. Excluding negative currency impacts of $8.3 million, or (0.6%) and pass-through of lower raw material costs of (2.4%), the decrease in net sales including intersegment sales for the six months ended December 31, 2019 was $22.3 million, or (1.6%), driven by unfavorable price/mix of (1.4%) and unfavorable volumes of (0.2)%.
Adjusted EBIT decreased $18.5 million, or 12.5%, to $130.0 million for the six months ended December 31, 2019, from $148.5 million for the six months ended December 31, 2018. Excluding negative currency impacts of $0.8 million, or (0.5%), the decrease in Adjusted EBIT for the six months ended December 31, 2019 was $17.7 million, or (11.9%), driven primarily by unfavorable price/mix of (12.9%) and favorable plant, SG&A and other costs of 1.0%.
Consolidated Gross Profit
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Gross profit | | $ | 1,164.0 |
| | $ | 844.6 |
|
Gross profit as a percentage of net sales | | 18.8 | % | | 18.6 | % |
Gross profit increased by 319.4 million, or 37.8%, to $1,164.0 million for the six months ended December 31, 2019, from $844.6 million for the six months ended December 31, 2018. The increase was primarily in the Flexibles reporting segment driven by the Bemis acquisition.
Consolidated Selling, General and Administrative ("SG&A") Expense
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
SG&A expenses | | $ | (680.2 | ) | | $ | (403.6 | ) |
SG&A expenses as a percentage of net sales | | (11.0 | %) | | (8.9 | %) |
SG&A expenses increased by $276.6 million, or 68.5%, to $680.2 million for the six months ended December 31, 2019, from $403.6 million for the six months ended December 31, 2018. The increase was primarily in the Flexibles reporting segment driven by the Bemis related acquisition, including related transaction and integration cost impacts.
Consolidated Research and Development ("R&D") Expense
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| | | | | | | | |
| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
R&D expenses | | $ | (49.4 | ) | | $ | (31.5 | ) |
R&D expenses as a percentage of net sales | | (0.8 | %) | | (0.7 | %) |
Research and development costs increased $17.9 million, or 56.8%, for the six months ended December 31, 2019, from $31.5 million for the six months ended December 31, 2018. The increase was primarily driven by the addition of the Bemis cost base and timing of project costs.
Consolidated Restructuring and Related Expense
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Restructuring and related expenses | | $ | (41.7 | ) | | $ | (52.4 | ) |
Restructuring and related expenses as a percentage of net sales | | (0.7 | %) | | (1.2 | %) |
Restructuring and related expense decreased by $10.7 million, or 20.4%, to $41.7 million for the six months ended December 31, 2019, from $52.4 million for the six months ended December 31, 2018. The decrease was primarily driven by reduction in restructuring activities in connection with the Rigid Packaging Restructuring Program partially offset by integration activities in connection with the Bemis transaction.
Consolidated Other Income, Net
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Other income, net | | $ | 20.2 |
| | $ | 41.9 |
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Other income, net, as a percentage of net sales | | 0.3 | % | | 0.9 | % |
Other income, net decreased by $21.7 million, or 51.8%, to $20.2 million for the six months ended December 31, 2019, from $41.9 million for the six months ended December 31, 2018 mainly driven by non repeating legal settlement gains in the six months ended December 31, 2018.
Consolidated Interest Income
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| | | | | | | | |
| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Interest income | | $ | 13.0 |
| | $ | 8.1 |
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Interest income as a percentage of net sales | | 0.2 | % | | 0.2 | % |
Interest income increased by $4.9 million, or 60.5%, to $13.0 million for the six months ended December 31, 2019, from $8.1 million for the six months ended December 31, 2018 mainly driven by higher cash balances during the period and negative interest rates on a portion of Euro denominated borrowings.
Consolidated Interest Expense
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| | | | | | | | |
| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Interest expense | | $ | (112.0 | ) | | $ | (108.4 | ) |
Interest expense as a percentage of net sales | | (1.8 | %) | | (2.4 | %) |
Interest expense increased by $3.6 million or 3.3%, to $112.0 million for the six months ended December 31, 2019, from $108.4 million for the six months ended December 31, 2018. The increase was primarily driven by acquired debt following the Bemis acquisition partially offset by the maturity of several higher cost U.S. Notes and Euro bonds.
Consolidated Other Non-Operating Income (Loss), Net
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Other non-operating income (loss), net | | $ | 12.0 |
| | $ | 3.1 |
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Other non-operating income (loss), net, as a percentage of net sales | | 0.2 | % | | 0.1 | % |
Other non-operating income (loss), net increased by $8.9 million to a $12.0 million gain for the six months ended December 31, 2019, from a $3.1 million gain for the six months ended December 31, 2018 mainly driven by impacts relating to the acquired Bemis pension plans.
Consolidated Income Tax Expense
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| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Income tax expense | | (61) | | | (22) | |
Effective income tax rate | | 25.2 | % | | 22.9 | % |
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| | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 |
Income tax expense | | $ | (66.9 | ) | | $ | (52.8 | ) |
Effective income tax rate | | 20.5 | % | | 17.5 | % |
The Company computes its provision for income taxes is computed by applying the estimated annual effective tax rate to year to date income before income taxes and equity in income of affiliated companies and adjustsis adjusted for discrete tax items recorded in the period.
The provision for income taxes for the three and six months ended December 31,September 30, 2020 and 2019 and 2018 is based on our projected annual effective tax rate for the respective fiscal year 2020,years, adjusted for discretespecific items that are required to be recognized in the period in which they are incurred.
Income tax expense for the three and six months ended December 31,September 30, 2020 and 2019 is $45.1$61 million and $66.9$22 million, respectively, compared to $31.1 million and $52.8 millionrespectively.
The effective tax rate for the three and six months ended December 31, 2018, respectively.
The effective tax for the six months ended December 31, 2019September 30, 2020 increased by 32.3 percentage points compared to the sixthree months ended December 31, 2018,September 30, 2019, from 17.5%22.9% to 20.5%25.2%. The increase in the income tax provision and the increase in the effective tax rate was primarily related to non-deductiblelower tax benefits on integration and restructuring and transaction costs and the increase of operating income earned in higher tax jurisdictions as a resultjurisdictions.
Equity in Income (Loss) of Affiliated Companies, Net of Tax
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
($ in millions) | | 2020 | | 2019 |
Equity in income (loss) of affiliated companies, net of tax | | 19 | | | 2 | |
Equity in income (loss) of affiliated companies, net of tax increased by $17 million for the three months ended September 30, 2020 due to the sale of the Bemis acquisition.
equity method investment in AMVIG on September 30, 2020. For further information, refer to Note 16, "Disposals."
Presentation of Non-GAAP Information
This Quarterly Report on Form 10-Q refers to non-GAAP financial measures: adjusted earnings before interest and taxes ("Adjusted EBIT") from continuing operations, adjusted net income from continuing operations, and net debt. These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of significant tax reform, certain amounts related to the effect of changes in currency exchange rates, acquisitions, and restructuring, including employee-related costs, equipment relocation costs, accelerated depreciation and the write-down of equipment. These measures also exclude gains or losses on sales of significant property and divestitures, certain litigation matters, and certain acquisition-related expenses, including transaction expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory, and order backlog, intangible amortization, and changes in the fair value of deferred acquisition payments. This adjusted information should not be construed as an alternative to results determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Management of the Company uses the non-GAAP measures to evaluate operating performance and believes that these non-GAAP measures are useful to enable investors and other external parties to perform comparisons of current and historical performance of the Company.
A reconciliation of reported net income attributable to Amcor plc to adjusted EBIT from continuing operations and adjusted net income from continuing operations for the three and six months ended December 31,September 30, 2020 and 2019 and 2018 is as follows:
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| | Three Months Ended September 30, | | |
($ in millions) | | 2020 | | 2019 | | | | |
Net income attributable to Amcor plc, as reported | | $ | 198 | | | $ | 66 | | | | | |
Add: Net income (loss) attributable to non-controlling interests | | 2 | | | 2 | | | | | |
Less: (Income) loss from discontinued operations, net of tax | | — | | | 8 | | | | | |
Income from continuing operations | | 200 | | | 76 | | | | | |
Add: Income tax expense | | 61 | | | 22 | | | | | |
Add: Interest expense | | 40 | | | 60 | | | | | |
Less: Interest income | | (3) | | | (7) | | | | | |
EBIT from continuing operations | | 298 | | | 151 | | | | | |
Add: Material restructuring programs (1) | | 14 | | | 17 | | | | | |
Add: Material acquisition costs and other (2) | | 9 | | | 84 | | | | | |
Add: Amortization of acquired intangible assets from business combinations (3) | | 41 | | | 68 | | | | | |
Add: Impact of hyperinflation (4) | | 4 | | | 15 | | | | | |
Less: Net gain on disposals (5) | | (9) | | | — | | | | | |
Adjusted EBIT from continuing operations | | $ | 358 | | | $ | 335 | | | | | |
Less: Income tax expense | | (61) | | | (22) | | | | | |
Add: Adjustments to income tax expense (6) | | (10) | | | (40) | | | | | |
Less: Interest expense | | (40) | | | (60) | | | | | |
Add: Interest income | | 3 | | | 7 | | | | | |
Less: Net (income) loss attributable to non-controlling interests | | (2) | | | (2) | | | | | |
Adjusted net income from continuing operations | | $ | 247 | | | $ | 218 | | | | | |
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| | Three Months Ended December 31, | | Six Months Ended December 31, |
($ in millions) | | 2019 | | 2018 | | 2019 | | 2018 |
Net income attributable to Amcor plc, as reported | | $ | 185.6 |
| | $ | 138.6 |
| | $ | 251.6 |
| | $ | 237.0 |
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Add: Net income (loss) attributable to non-controlling interests | | 2.2 |
| | 2.0 |
| | 4.2 |
| | 5.1 |
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Less: (Income) loss from discontinued operations, net of tax | | — |
| | — |
| | 7.7 |
| | — |
|
Income from continuing operations | | 187.8 |
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| 140.6 |
| | 263.5 |
| | 242.1 |
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Add: Income tax expense | | 45.1 |
| | 31.1 |
| | 66.9 |
| | 52.8 |
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Add: Interest expense | | 52.3 |
| | 52.1 |
| | 112.0 |
| | 108.4 |
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Less: Interest income | | (6.3 | ) | | (5.2 | ) | | (13.0 | ) | | (8.1 | ) |
EBIT from continuing operations | | 278.9 |
|
| 218.6 |
| | 429.4 |
| | 395.2 |
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Add: Material restructuring programs (1) | | 23.4 |
| | 27.6 |
| | 40.7 |
| | 37.7 |
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Add: Impairments in equity method investments (2) | | — |
| | 11.4 |
| | — |
| | 13.9 |
|
Add: Material acquisition costs and other (3) | | 17.7 |
| | 29.8 |
| | 101.2 |
| | 35.1 |
|
Add: Amortization of acquired intangible assets from business combinations (4) | | 40.9 |
| | 4.7 |
| | 109.2 |
| | 9.5 |
|
Add/(Less): Economic net investment hedging activities not qualifying for hedge accounting (5) | | — |
| | (4.2 | ) | | — |
| | (1.5 | ) |
Add: Impact of hyperinflation (6) | | 3.1 |
| | 9.6 |
| | 18.5 |
| | 19.0 |
|
Less: Net legal settlements (7) | | — |
| | (15.5 | ) | | — |
| | (15.5 | ) |
Adjusted EBIT from continuing operations | | 364.0 |
| | 282.0 |
| | 699.0 |
| | 493.4 |
|
Less: Income tax expense | | (45.1 | ) | | (31.1 | ) | | (66.9 | ) | | (52.8 | ) |
Add: Adjustments to income tax expense (8) | | (15.9 | ) | | (9.2 | ) | | (56.1 | ) | | (14.4 | ) |
Less: Interest expense | | (52.3 | ) | | (52.1 | ) | | (112.0 | ) | | (108.4 | ) |
Add: Interest income | | 6.3 |
| | 5.2 |
| | 13.0 |
| | 8.1 |
|
Less: Net (income) loss attributable to non-controlling interests | | (2.2 | ) | | (2.0 | ) | | (4.2 | ) | | (5.1 | ) |
Adjusted net income from continuing operations | | $ | 254.8 |
| | $ | 192.8 |
| | $ | 472.8 |
| | $ | 320.8 |
|
(1)Material restructuring programs includes the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three months ended September 30, 2020 and 2019. Refer to Note 4, "Restructuring Plans," for more information about the Company's restructuring plans. | |
(1) | Material restructuring programs includes the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three and six months ended December 31, 2019. For the three and six months ended December 31, 2018, material restructuring plans include the 2018 Rigid Packaging Restructuring Plan. Refer to Note 5, "Restructuring Plans" of "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements," for more information about our restructuring plans. |
| |
(2) | Impairments in equity method investments includes the impairment charges related to other-than-temporary impairments related to the investment in AMVIG. |
| |
(3) | Material acquisition costs and other includes $58.0 million amortization of Bemis acquisition related inventory fair value step-up and $43.2 million of Bemis transaction related costs and integration costs not qualifying as exit costs for the six months ended December 31, 2019. |
(2)Material acquisition costs and other includes Bemis transaction related costs and integration costs not qualifying as exit costs for the three months ended September 30, 2020. Material acquisition costs and other includes $58 million amortization of Bemis acquisition related inventory fair value step-up and $26 million of Bemis transaction related costs and integration costs not qualifying as exit costs for the three months ended September 30, 2019.
(3)Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from acquisitions impacting the periods presented, including $26 million of sales backlog amortization for the three months ended September 30, 2019 from the Bemis acquisition.
(4)Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.
(5)Net gain on disposals includes the gain realized upon the disposal of AMVIG and other non-core businesses. Refer to Note 16, "Disposals" for more information about the Company's disposals.
(6)Net tax impact on items (1) through (5) above.
| |
(4) | Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from acquisitions impacting the periods presented, including $26.4 million of sales backlog amortization for the six months ended December 31, 2019 from the Bemis acquisition. |
| |
(5) | Economic net investment hedging activities not qualifying for hedge accounting includes the exchange rate movements on external loans not deemed to be effective net investment hedging instruments resulting from the our conversion to U.S. GAAP from Australian Accounting Standards ("AAS") recognized in other non-operating income (loss), net. |
| |
(6) | Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso. |
| |
(7) | Net legal settlements includes the impact of significant legal settlements after associated costs. |
| |
(8) | Net tax impact on items (1) through (7) above. |
Reconciliation of Net Debt
A reconciliation of total debt to net debt at December 31, 2019September 30, 2020 and June 30, 20192020 is as follows:
| | | | | | | | | | | | | | |
($ in millions) | | September 30, 2020 | | June 30, 2020 |
Current portion of long-term debt | | $ | 13 | | | $ | 11 | |
Short-term debt | | 225 | | | 195 | |
Long-term debt, less current portion | | 6,361 | | | 6,028 | |
Total debt | | 6,599 | | | 6,235 | |
Less cash and cash equivalents | | 757 | | | 743 | |
Net debt | | $ | 5,842 | | | $ | 5,492 | |
Supplemental Guarantor Information
|
| | | | | | | | |
($ in millions) | | December 31, 2019 | | June 30, 2019 |
Current portion of long-term debt | | $ | 4.2 |
| | $ | 5.4 |
|
Short-term debt | | 353.0 |
| | 788.8 |
|
Long-term debt, less current portion | | 5,853.5 |
| | 5,309.0 |
|
Total debt | | 6,210.7 |
| | 6,103.2 |
|
Less cash and cash equivalents | | 673.8 |
| | 601.6 |
|
Net debt | | $ | 5,536.9 |
| | $ | 5,501.6 |
|
Amcor plc, along with certain wholly owned subsidiary guarantors, guarantee the following senior notes issued by the wholly owned subsidiaries, Amcor Finance (USA), Inc., Bemis Company, Inc. and Amcor UK Finance plc.
•4.500% Guaranteed Senior Notes due 2021 of Bemis Company, Inc.
•3.100% Guaranteed Senior Notes due 2026 of Bemis Company, Inc.
•2.630% Guaranteed Senior Notes due 2030 of Bemis Company, Inc.
•3.625% Guaranteed Senior Notes due 2026 of Amcor Finance (USA), Inc.
•4.500% Guaranteed Senior Notes due 2028 of Amcor Finance (USA), Inc.
•1.125% Guaranteed Senior Notes due 2027 of Amcor UK Finance plc
The three notes issued by Bemis Company, Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd (formerly known as Amcor Limited), Amcor Finance (USA), Inc. and Amcor UK Finance plc. The two notes issued by Amcor Finance (USA), Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Bemis Company, Inc. and Amcor UK Finance plc. The note issued by Amcor UK Finance plc is guaranteed by its parent entity, Amcor plc, and the subsidiary guarantors Amcor Pty Ltd, Bemis Company, Inc. and Amcor Finance (USA), Inc.
All guarantors fully, unconditionally and irrevocably guarantee, on a joint and several basis, to each holder of the notes the due and punctual payment of the principal of, and any premium and interest on, such note and all other amounts payable, when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of the notes and related indenture. The obligations of the applicable guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose or similar laws) under applicable law. The guarantees will be unsecured and unsubordinated obligations of the guarantors and will rank equally with all existing and future unsecured and unsubordinated debt of each guarantor. None of our other subsidiaries guarantee such notes. The issuers and guarantors conduct large parts of their operations through other subsidiaries of Amcor plc.
Bemis is incorporated in Missouri in the United States, Amcor Finance (USA) Inc. is incorporated in Delaware in the United States, Amcor UK Finance plc is incorporated in England and Wales, United Kingdom and the guarantors are incorporated under the laws of Jersey, Australia, the United States, and England and Wales and, therefore, insolvency proceedings with respect to the issuers and guarantors could proceed under, and be governed by, among others, Jersey, Australian, United States or English insolvency law, as the case may be, if either issuer or any guarantor defaults on its obligations under the applicable Notes or Guarantees, respectively.
Set forth below is the summarized financial information of the combined obligor group made up of Amcor plc (as parent guarantor), Bemis Company, Inc., Amcor Finance (USA), Inc. and Amcor UK Finance plc (as subsidiary issuers of the notes and guarantors of each other’s notes) and Amcor Pty Ltd (as the remaining subsidiary guarantor).
Basis of Preparation
Amcor has voluntarily adopted amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered as issued by the SEC [Release No. 33-10762; 34-88307; File No. S7-19-18] in March 2020. The following summarized financial information is presented for the parent, issuer, and guarantor subsidiaries ("Obligor Group") on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor.
This information is not intended to present the financial position or results of operations of the combined group of companies in accordance with U.S. GAAP.
Statement of Income for Obligor Group
| | | | | | | | |
($ in millions) | | Three Months Ended September 30, 2020 |
Net sales - external | | $ | 234 | |
Net sales - to subsidiaries outside the Obligor Group | | 2 | |
Total net sales | | 236 | |
| | |
Gross profit | | 45 | |
| | |
Income from continuing operations (1) | | (26) | |
| | |
Income (loss) from discontinued operations, net of tax | | — | |
| | |
Net income | | $ | (26) | |
| | |
Net (income) loss attributable to non-controlling interests | | — | |
| | |
Net income attributable to Obligor Group | | $ | (26) | |
(1)Includes $110 million net income from subsidiaries outside the Obligor Group mainly made up of intercompany dividend and interest income.
Balance Sheet for Obligor Group
| | | | | | | | | | | | | | |
(in millions) | | September 30, 2020 | | June 30, 2020 |
Assets | | | | |
Current assets - external | | $ | 667 | | | $ | 899 | |
Current assets - due from subsidiaries outside the Obligor Group | | 70 | | | 136 | |
Total current assets | | 737 | | | 1,035 | |
Non-current assets - external | | 993 | | | 1,002 | |
Non-current assets - due from subsidiaries outside the Obligor Group | | 12,740 | | | 12,405 | |
Total non-current assets | | 13,733 | | | 13,407 | |
Total assets | | $ | 14,470 | | | $ | 14,443 | |
Liabilities | | | | |
Current liabilities - external | | $ | 1,433 | | | $ | 1,647 | |
Current liabilities - due from subsidiaries outside the Obligor Group | | 16 | | | 36 | |
Total current liabilities | | 1,449 | | | 1,683 | |
Non-current liabilities - external | | 6,408 | | | 6,074 | |
Non-current liabilities - due from subsidiaries outside the Obligor Group | | 11,331 | | | 11,201 | |
Total non-current liabilities | | 17,739 | | | 17,274 | |
Total liabilities | | $ | 19,188 | | | $ | 18,957 | |
New Accounting Pronouncements
Refer to Note 2, "New Accounting Guidance," in "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements."
Critical Accounting Estimates and Judgments
Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Our estimates and judgments are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. These critical accounting estimates are discussed in detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates and Judgments” in our Annual Report on Form 10-K for the year ended June 30, 2020.
Liquidity and Capital Resources
We finance our business primarily through cash flows provided by operating activities, borrowings from banks and proceeds from issuances of debt and equity. We periodically review our capital structure and liquidity position in light of market conditions, expected future cash flows, potential funding requirements for debt refinancing, capital expenditures and acquisitions, the cost of capital, sensitivity analyses reflecting downside scenarios, the impact on our financial metrics and credit ratings, and our ease of access to funding sources.
Based on our current and expected cash flow from operating activities and available cash, we believe our cash flows provided by operating activities, together with borrowings available under our credit facilities, will continue to provide sufficient liquidity to fund our operations, capital expenditures and other commitments.commitments, including dividends, into the foreseeable future.
During the first quarter of fiscal 2021, the company repaid €100 million Euro Private Placement Notes on September 1, 2020.
Despite the existing market uncertainties and volatilities stemming from the COVID-19 pandemic, based on our current and expected cash flow from operating activities and available cash, we believe our cash flows provided by operating activities, together with borrowings available under our credit facilities and access to the commercial paper market back stopped by our bank facilities, will continue to provide sufficient liquidity to fund our operations, capital expenditures and other commitments, including dividends and purchases of our ordinary shares and CHESS Depositary Instruments under authorized share repurchase programs, into the foreseeable future.
Overview
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | |
($ in millions) | | 2020 | | 2019 | | Change 1Q 2021 vs. 1Q 2020 |
Cash flow from operating activities | | $ | (110) | | | $ | (89) | | | $ | (21) | |
Cash flow from investing activities | | 27 | | | 284 | | | (257) | |
Cash flow from financing activities | | 76 | | | (306) | | | 382 | |
|
| | | | | | | | | | | | |
| | Six Months Ended December 31, | | |
($ in millions) | | 2019 | | 2018 | | Change YTD 2Q 2020 vs. YTD 2Q 2019 |
Cash flow from operating activities | | $ | 342.0 |
| | $ | 234.7 |
| | $ | 107.3 |
|
Cash flow from investing activities | | 194.0 |
| | (112.9 | ) | | 306.9 |
|
Cash flow from financing activities | | (442.1 | ) | | (229.9 | ) | | (212.2 | ) |
Cash Flow Overview
Cash Flow from Operating Activities
Net cash inflows provided byoutflows used in operating activities increased by $107.3$21 million, or 45.7%23%, to $342.0$110 million for the sixthree months ended December 31, 2019,September 30, 2020, from $234.7$89 million for the sixthree months ended December 31, 2018. ThisSeptember 30, 2019. The increase was primarily due to impactsmainly driven by inflows from the Bemis acquisition.increased net income offset by working capital outflows.
Cash Flow from Investing Activities
Net cash inflows provided by investing activities increaseddecreased by $306.9$257 million, or 271.8%91%, to $194.0$27 million for the sixthree months ended December 31, 2019,September 30, 2020, from a $112.9$284 million inflow for the three months ended September 30, 2019. This decrease was primarily due to higher disposal proceeds in the prior period mainly from the EC Remedy related to the Bemis acquisition.
Cash Flow from Financing Activities
Net cash flows from financing activities increased by $382 million to $76 million for the three months ended September 30, 2020, from a $306 million outflow for the sixthree months ended December 31, 2018.September 30, 2019. This increase was primarily due to disposal proceeds fromhigher net debt repayments in the EC and U.S. Remedies related to the Bemis acquisition.
Cash Flow from Financing Activities
Net cash flows used in financing activities decreased by $212.2 million, or 92.3%, to $442.1 million for the six months ended December 31, 2019, from a $229.9 million outflow for the six months ended December 31, 2018. This decrease was primarily due to the share buy-back program and the increase in dividends paid,prior period, partially offset by an increasedividend payments in commercial paper borrowings.the current period.
Net Debt
We borrow money from financial institutions and debt investors in the form of bank overdrafts, bank loans, corporate bonds, unsecured notes and commercial paper. We have a mixture of fixed and floating interest rates and use interest rate swaps to provide further flexibility in managing the interest cost of borrowings.
Short-term debt consists of bank debt with a duration of less than 12 months and bank overdrafts which are classified as current due to the short-term nature of the borrowings, except where we have the ability and intent to refinance and as such extend the debt beyond 12 months. The current portion of the long-term debt, except where we have the ability and intent to refinance, consists of debt amounts repayable within a year after the balance sheet date.
Our primary bank debt facilities and notes are unsecured and subject to negative pledge arrangements limiting the amount of secured indebtedness we can incur to a range between 7.5% to 15.0% of our total tangible assets, subject to some exceptions and variations by facility. In addition, the bank debt facilities and U.S. private placement debt require us to comply with certain financial covenants, including leverage and interest coverage ratios. The negative pledge arrangements and the financial covenants are defined in the related debt agreements. As of December 31, 2019,September 30, 2020, we arewere in compliance with all applicable covenants under our bank debt facilities and U.S. private placement debt.
Our net debt as of December 31, 2019September 30, 2020 and June 30, 20192020 was $5.8 billion and $5.5 billion.billion, respectively.
Available Financing
As of December 31, 2019,September 30, 2020, we had undrawn credit facilities available in the amount of $1.9$1.4 billion. Our senior facilities are available to fund working capital, growth capital expenditures and refinancing obligations and are provided to us by fivefour separate bank syndicates. On September 25, 2019 and December 15, 2019, we canceled $250.0 million and $100.0 million, respectively, of the $750.0 million term loan facility.
As of December 31, 2019,September 30, 2020, the revolving senior bank debt facilities had an aggregate limit of $5.2$4.2 billion, of which $3.3$2.8 billion had been drawn (inclusive of amounts drawn under commercial paper programs reducing the overall balance of available senior facilities). Our senior facilities mature between fiscal years 20202022 and 2024.
Dividend Payments
During the three months ended December 31, 2019,September 30, 2020, we declared and paid a $0.115 cash dividend per ordinary share. We also paid a $0.120 cash dividend per ordinary share for a dividend declared in the first quarter of fiscal year 2020.
Credit Rating
Our capital structure and financial practices have earned us investment grade credit ratings from two internationally recognized credit rating agencies. These credit ratings are important to our ability to issue debt at favorable rates of interest, for various tenors and from a diverse range of markets that are highly liquid, including European and U.S. debt capital markets and from global financial institutions.
Share Repurchases
On August 21, 2019, our Board of Directors approved an on-market buy-back of $500 million of ordinary shares and Chess Depositary Instruments ("CDIs"). During the six months ended December 31, 2019, the Company repurchased approximately $222.6 million, including transaction costs, or 21.9 million shares. The shares repurchased as part of the program were canceled upon repurchase.
We had cash outflows of $11.3 millionzero and $21.2$10 million for the purchase of our shares in the open market during the sixthree months ended December 31,September 30, 2020 and 2019, and 2018, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of December 31, 2019September 30, 2020, and June 30, 2019,2020, we held treasury shares at cost of $11.4$49 million and $16.1$67 million, representing 1.14.9 million and 1.46.7 million shares, respectively.
New Accounting Pronouncements
Refer to Note 2, "New Accounting Guidance," in Item "1. Financial Statements - Notes to Condensed Consolidated Financial Statements."
Critical Accounting Estimates and Judgments
Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to pension costs, intangible assets and goodwill, deferred taxes, and equity accounted investments. Our estimates and judgments are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. These critical accounting estimates are discussed in detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates and Judgments” in the our Annual Report on Form 10-K for the year ended June 30, 2019.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company’sour market risk during the three-month periodthree months ended December 31, 2019.September 30, 2020. For additional information, refer to Note 8,7, "Fair Value Measurements," and Note 9,8, "Derivative Instruments," to the notes to the Company'sour unaudited condensed consolidated financial statements and to "Item 7A. - Quantitative and Qualitative Disclosures About Market Risk" of the Company’sour Annual Report on Form 10-K for the year ended June 30, 2019.2020.
Item 4. Controls and Procedures
a)Evaluation of Disclosure Controls and Procedures
As previously disclosed under “Item 9A. - Controls and Procedures” in our Annual Report on Form 10-K for our fiscal year ended June 30, 2019 filed with the SEC on September 3, 2019, we identified two material weaknesses in our internal control over financial reporting during the conversion of our historical AAS financial statements to U.S. GAAP. The first material weakness was related to our lack of accounting staff and supervisory personnel with the appropriate level of experience in technical accounting in U.S. GAAP and disclosure and filing requirements of a U.S. domestic registrant. We also identified a second material weakness arising from deficiencies in the design and operating effectiveness of internal controls over the period end reporting process. Specifically, we did not design and maintain effective controls to verify that conflicting duties were appropriately segregated within key IT systems used in the preparation and reporting of financial information.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019.September 30, 2020. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness ofManagement recognizes that any system of disclosure controls and procedures, including the possibility of human errorno matter how well designed and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and proceduresoperated, can provide only provide reasonable assurance of achieving their control objectives. Our disclosureobjectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures are designed to provide reasonable assurance of achieving their control objectives.
As a result ofprocedures. Based on the existing material weaknesses noted above,evaluation conducted, our Chief Executive Officer and Chief Financial Officer have concluded that ourthe Company's disclosure controls and procedures were not effective as of December 31, 2019.
Management’s Remediation Initiatives
With respectSeptember 30, 2020, due to the firstexistence of a material weakness related to a lack of experience in technical accountingour internal control over financial reporting that was identified in U.S. GAAPour prospectus filed with the SEC on March 25, 2019 and the filing requirements of a U.S. domestic registrant, we are currentlyis still being remediated, as described below.
Material Weakness in the process of remediating thisInternal Control Over Financial Reporting
A material weakness and have taken numerous steps to address the underlying causesis a deficiency, or combination of the material weakness. We have hired additionaldeficiencies, in internal control over financial reporting, personnel with U.S. GAAP technical accounting andsuch that there is a reasonable possibility that a material misstatement in our annual or interim financial reporting experience, as well as U.S. domestic registrant filing experience, aligned our accounting policies and procedures with U.S. GAAP, enhanced our internal review procedures during the financial close process with U.S. GAAP experienced staff, and have conducted technical training for accounting and finance personnel. We believe that these enhanced resources and processes will effectively remediate the material weakness, but the material weaknessstatements will not be considered remediated until sufficient time has passed to enable us to conclude the remediation efforts are effective.prevented or detected on a timely basis.
With respect to the second As previously disclosed, we identified a material weakness related toarising from deficiencies in the design and operating effectiveness of internal controls over the period end reporting process,process. Specifically, we did not design and maintain effective controls to verify that conflicting duties were appropriately segregated within key IT systems used in the preparation and reporting of financial information. This control deficiency did not result in a misstatement of our consolidated financial statements. However, the control deficiency could have resulted in misstatements of our interim or annual consolidated financial statements and disclosures that may have not been prevented or detected on a timely basis.
Remediation Efforts to Address Material Weakness
We are currently in the process of remediating thisthe material weakness by commencingdescribed above through a process to (i) develop and implement additional controls and procedures to reduce the number of segregation of duties conflicts within key IT systems, which includes the implementation of new security roles and the automation of segregation of duties monitoring where practical, (ii) designingdesign and implementingimplement additional compensating controls where necessary.necessary and (iii) develop training on segregation of duties. Given we operate many ERP systems globally, this effort is currently targetingtargeted the largest locations with standardized systems. We believe that thesesystems in fiscal 2020 and is being expanded to additional locations in fiscal 2021. These enhanced processes, including the implementation of new mitigating controls, will effectively remediate the material weakness, but the material weakness will not be considered remediated until the revised controls operate for a sufficient period of time and we have concluded, through testing in the second half of fiscal year 2021, that these controlsthey are designed and operating effectively.
We currently expect that the remediation of this material weakness will be fully remediated by the end of fiscal 2021. However, there is no assurance that this material weakness will be fully remediated by the end of fiscal 2021 given the severity and length of the 2019 Novel Coronavirus ("COVID-19") pandemic is unknown and the remediation timeline, while not significantly impacted to date, could be negatively impacted because of inefficiencies caused by COVID-19 limitations on travel, meetings and on-site work.
b)
a)Changes in Internal Control Over Financial Reporting
Except as described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the secondfirst fiscal quarter of 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
The material set forth in Note 16,15, "Contingencies and Legal Proceedings," in Item "1."Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements."Statements" is incorporated herein by reference.
Item 1A. Risk Factors
Information about our There have been no material changes from the risk factors is contained in "Item 1A1A. - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2019. We believe that at December 31, 2019, there has been no material change to this information.2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share repurchase activity duringRepurchases
During the three months ended December 31, 2019 were as follows (in millions, except number of shares, which are reflected in thousands, and per share amounts):September 30, 2020, the Company did not repurchase any shares.
|
| | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (2) | | Average Price Paid Per Share (2)(3) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (1) |
October 1 - 31, 2019 | | — |
| | $ | — |
| | — |
| | $ | 441.8 |
|
November 1 - 30, 2019 | | 7,556 |
| | 10.03 |
| | 7,547 |
| | 366.1 |
|
December 1 - 31, 2019 | | 8,637 |
| | 10.33 |
| | 8,547 |
| | 277.8 |
|
Total | | 16,193 |
| | $ | 10.19 |
| | 16,094 |
| |
|
| |
(1) | On August 20, 2019, our Board of Directors approved an on-market buy-back program of $500 million of ordinary shares and CHESS Depositary Instruments ("CDIs"). Board authorizations remain in effect until shares in the amount authorized thereunder have been repurchased. |
| |
(2) | Includes shares purchased on the open market to satisfy the vesting and exercises of share-based compensation awards. |
| |
(3) | Includes shares purchased on the open market to satisfy the vesting and exercises of share-based compensation awards. Average price paid per share excludes costs associated with the repurchase. |
Item 3. Defaults Upon Senior Securities
Note Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
Pursuant to The documents in the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), we haveaccompanying Exhibits Index are filed, furnished or incorporated by reference certain agreements as exhibits topart of this Quarterly Report on Form 10-Q. These agreements may contain representations10-Q, and warrantiessuch Exhibits Index is incorporated herein by the parties thereto. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe our actual state of affairs at the date hereof and should not be relied upon.reference.
| | | | | | | | | | | | | | | | | |
Exhibit | | Description | | Form of Filing |
22 | | | | | Filed Herewith |
31 | .1 | | | | Filed Herewith |
31 | .2 | | | | Filed Herewith |
32 | | | | | Furnished Herewith |
101 | .INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document. | | Filed Electronically |
101 | .SCH | | Inline XBRL Taxonomy Extension Schema Document. | | Filed Electronically |
101 | .CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | Filed Electronically |
101 | .DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | Filed Electronically |
101 | .LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. | | Filed Electronically |
101 | .PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | Filed Electronically |
104 | | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | | Filed Electronically |
|
| | | | |
Exhibit | | Description | | Form of Filing |
3.1 | | | | Incorporation by Reference |
3.2 | | | | Incorporation by Reference |
31.1 | | | | Filed Herewith |
31.2 | | | | Filed Herewith |
32 | | | | Furnished Herewith |
101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBLR tags are embedded within the Inline XBRL document. | | Filed Electronically |
101.SCH | | XBRL Taxonomy Extension Schema Document. | | Filed Electronically |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. | | Filed Electronically |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. | | Filed Electronically |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. | | Filed Electronically |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. | | Filed Electronically |
104 | | Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101). | | Filed Electronically |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | AMCOR PLC |
| | | |
| | | |
Date | November 6, 2020 | By | AMCOR PLC |
| | | |
| | | |
Date | February 11, 2020 | By | /s/ Michael Casamento |
| | | Michael Casamento, Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | | |
Date | November 6, 2020 | By | /s/ Julie Sorrells |
| | | Julie Sorrells, Vice President and Corporate Controller (Principal Accounting Officer) |